FCC Chair Unveils “Connect America Fund”

Yesterday the US telecommunications regulator outlined a plan to transform the Universal Service Fund, an USD8 billion fund that is paid for by US telephone customers and used to subsidize basic telephone service in rural areas, into one that will help expand broadband Internet service to 18 million Americans who lack high-speed access.

The plan, which comprises reform and modernization of the Universal Service Fund (USF) and Intercarrier Compensation (ICC), would provide for broadband in hundreds of thousands of homes and businesses beginning next year and would cut by half the number of Americans without broadband access by 2017, according to FCC Chairman Julius Genachowski.

Despite spending USD4.5 billion per year, the Universal Service Fund is failing to get broadband to about 18 million Americans in rural areas. The plan would make sure money is spent in a more targeted and efficient way, bringing greater fairness and benefit for consumers who pay into USF each month, Genachowski said in a statement.

According to his plan, the USF would be transformed into a "Connect America Fund" with a two-fold goal:

  1. Ensuring universal availability of robust, scalable, affordable broadband to homes, businesses and anchor institutions in unserved areas, and ensuring universal availability of affordable mobile broadband through a new Mobility Fund, which would be part of the Connect America Fund.
  2. Deployment of state-of-the-art mobile broadband would be extended to more than 100,000 road miles where Americans live, work, and travel.

In addition, the growth of the Connect America Fund would be constrained, keeping hundreds of millions of dollars in consumers' pockets over the coming years. To help achieve this, Mr. Genachowski introduced a competitive bidding process among providers for obtaining universal service support, which would transition over time to a fully competitive system for distributing Connect America Fund dollars.

The proposed ICC reforms would tackle hidden subsidies that are built into wireless and long distance phone bills. The reforms include three main elements:

  1. Immediately close loopholes like phantom traffic and traffic pumping, and other arbitrage schemes like CMRS-in-the-middle, where some carriers divert wireline traffic to wireless networks to avoid paying ICC. The plan would also provide greater certainty about compensation for VoIP calls that either begin or end on the PSTN, ensuring symmetry in the treatment of such traffic.
  2. Phase down ICC charges over a measured but certain multi-year transition path, starting by bringing intrastate access rates to parity with interstate rates.
  3. Help companies transition by employing a tightly controlled recovery mechanism. The plan would permit some companies to receive transitional support from the Connect America Fund, but that support would be accompanied by obligations to serve the public as well as strong oversight and accountability.

Read the press release.

Also noteworthy: FCC Announces Changes to USF Phone Company Subsidies (DSL Reports).

Source: NY Times, FCC

UPDATE 13 October:

FCC Publishes Broadband Availability Map.

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